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Research and development: The give and the take

Federal Budget 2013

The lead up to the budget saw the release of two exposure draft for comment and consultation. The welcome gestures of ‘give’ were seen the steps starting to be taken to introduce the quarterly payment of tax offsets. As has been recognized by the Government, there is a need for companies, particularly SMEs to be supported during sometimes long periods of little or no revenue and the allowing access to tax offsets during the year will provide welcomed cash flow.

The ‘take’ is the proposed introduction of the $20 billion assessable income threshold, which if companies meet, they will be denied the tax offsets and instead revert back to deductions.

“The rationale for introducing this third tier is that SMEs are more likely to respond to tax incentives and undertake the R&D.,” said Sukvinder Heyer, Indirect Tax Partner at Grant Thornton Australia.

“Larger companies are thought to do the projects anyway. Anecdotally, this does not hold true and there is just as much fight to capital in large companies as there is in small and R&D incentives are playing a role in whether marginal projects are being undertaken.”

“Government support of innovation is important for large and small companies. We have yet to see the flow on effects of the introduction of the R&D tax incentive – the claims for the first year have just gone in. It seems too early to start tinkering with the system already,” she said.

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